Customer driven innovations

Authors: Katsiaryna Archakova

Olga Mazur

Subject: Master Thesis in Business Administration 15 ECTS

Program: Master of International Management

Gotland University

Spring semester 2011

Supervisor: Bo Lennstrand, PhD

Abstract

Cooperation between customers and companies has existed for a long time. However, the role of

a customer was rather passive and organizations were the ones who dictated their rules and took

a leading role in the process of product creation. With a course of time the situation has been

changed and customers are becoming more and more involved into the process of cooperation.

As a customer driven innovation is relatively new phenomenon, the aim of our study is to

examine its status in the modern business world.

It can be observed that organizations all around the globe claim about their readiness and

willingness to listen to customers and cooperate with them. Companies create customer support

sections where they offer to leave complaints, comments and suggestions. Airline companies

tend to have such experience. ―We want to hear from you. Your feedback is important and helps

us become a better airline‖ claims Delta Airlines. Tiger Airways states ―Yes! We want to hear

from you! Submit your feedback via our Customer Support Portal‖. And there is multitude of

such examples. With the help of the investigation of theoretical material, survey conduction and

examining practical examples we aim to examine the issue of customer involvement into

cooperation with organizations as well as to found out how ready customers are for such

collaboration.

Key words: innovation, company, customer involvement, motives, obstacles

Summary

In our thesis the concept of customer driven innovation is investigated. According to Desauza et

al. (2008) customer-driven innovation is needed for the continual, sustainable innovation.

Nowadays, organizations change their strategy from ―innovating for customers‖ and ―innovating

with customers‖ to innovating ―by customers‖ (Gibbert et al., 2002). The concept means that

customers are involved in innovation process and their ideas, suggestions and even complaints

are considered as a driving force for innovations. The main feature is that a customer is a

provider of the innovation or idea, regardless the initiator of the cooperation between customer

and company.

The theory says about necessity for organizations to collaborate with customers. Companies start

more actively claim about their willingness and readiness for such cooperation. However, the

question is set up whether it corresponds to reality.

The purpose of study was to analyze the process of cooperation between companies and

customers and which obstacles can limit their collaboration. Another aim was to examine

consumers’ readiness and willingness to cooperate with companies.

In thesis qualitative methods were used for the investigation of the topic and analyzing data,

obtained from questionnaires. Data collection in the thesis includes primary and secondary data.

The first one is derived with the help of research conduction by using questionnaires. 60

respondents from Europe and Post-USSR participated in the survey. Secondary data was

collected using web sources and scientific articles related to the topic.

With the help of the survey we aimed to investigate a tendency in the cooperation between

customers and organizations. The results reflect the respondents’ perception of companies

willingness for cooperation and obstacles that can limit cooperation. Moreover, showing of the

survey demonstrate the most important motives for customers to share ideas with companies as

well as required tools for their expression. Several respondents were asked for additional details

in order to better understand and interpret an obtained from the survey information.

TABLE OF CONTENTS

1. Introduction ......................................................................................................................... 1

1.1.Problem discussion ....................................................................................................... 1

1.2.Research design ............................................................................................................ 3

2. Theoretical Framework........................................................................................................ 6

3. The process of value co-creation ......................................................................................... 8

3.1.Building a co-creation capability .................................................................................. 8

3.2.Customer involvement into the process of cooperation ............................................... 9

3.3.Customer complaints as a source of innovation ......................................................... 12

3.4.Obstacles for cooperation between customers and companies .................................. 14

4. Costomer-driven innovation process: Practical implementation ...................................... 16

5. Empirical investigation .................................................................................................... 19

5.1.Survey analysis ........................................................................................................... 19

5.2.Limitation and validity of research ............................................................................. 25

6. Conclusion ......................................................................................................................... 27

Reference list .......................................................................................................................... 29

Appendix ............................................................................................................................................. 32

1

1. Introduction

In today's world sellers of goods and services must compete with their rivals not only from the

neighboring streets, but also from all around the world. Obtaining the competitive advantage is

one of discussed topics in the business sphere. Gary Hamel (2002) in his book ―Leading the

revolution‖ pointed out this idea by the following expression: ―First, the revolutionaries will take

your markets and your customers, next, they’ll take your employees, and finally, they will take

your assets.‖ Under the revolutionaries Gary Hamel means successful companies, that are

innovative and do not lose business opportunities.

However, the question arises: Where is it possible to get necessary innovations and what kind of

innovation it should be? Under the term ―innovation‖ people used to think about new high-tech

products, built using the latest scientific knowledge. It can be explained by the fact that almost

all innovations are associated with big companies and hard work of scientists.

Many companies reinforce its control of the innovation process and spent money on it. But in

order to move to a higher competitive level of business, tough management is not enough. A

certain balance of control and creativity is required. In this case creativity can mean out of the

ordinary ways of obtaining new business ideas. Cooperation with customers can be one of the

ways to get fresh ideas for business.

In our thesis the concept of customer driven innovations is investigated. Term ―customer driven

innovation‖ means not only innovations that are initiated by customer, but also innovations that

are related to the customer involvement through the process of collaboration and value co-

creation; however, they can be initiated by company. The accent in this term is put not on the

innovation in the meaning of new product creation; customer driven innovation is about new

company’s approach to a value co-creation. Thereby, the main point in this type of innovations is

that the customer is a provider of the idea, regardless the initiator of the cooperation between

customer and company. Under the term innovation, improvements, modifications of existing

products as well as creation of radically new products are meant.

1.1. Problem discussion

Nowadays consumers are connected, informed and active (Prahalad, Ramaswamy, 2004). They

can gain and share information via Internet, word-of-mouth and through other tools of

communication. With increasing awareness companies have to put more efforts to satisfy

customers’ needs. In the modern world customers tend to discuss products and their attitudes

towards them. As Bhalla (2011) states ―customers are not waiting passively to receive marketing

messages‖. They have started to create their own messages and share them with others —

friends, strangers, communities, media, government, and companies, even geographical factor is

not a limit anymore for the information exchange.

As the role of the consumer has been changed with the years, it can be a great opportunity for

companies to get fresh ideas, and hence, be creative by cooperating with their consumers. It

became unreasonable for companies to stay away from collaboration with customers.

Nevertheless, not all companies involve customers into a new product development process

(Alam, 2002). They use more traditional techniques for communication, research and design,

hereby skimming only the surface of customer needs (Archer et al., 2004).

2

In traditional marketing communication producer decides what information to share with

consumers. Information in this case can be shared with the help of advertisement, PR-events or

other similar means. Fig.1 illustrates such information exchange. P represents Producer and C

stands for Consumers.

Figure 1. Producers communicate to consumers (Lundkvist, 2003)

Lundkvist (2003) states that in the model where producers communicate to consumers

―production, communication and consumption are separate processes‖. This model does not

represent cooperation between organizations and consumers, as soon as interaction is not mutual.

Fig. 2 describes reciprocation in the interaction between consumers and producers. In the new

model consumers are involved into collaboration.

Figure 2. Consumers converse with producers (Lundkvist, 2003)

Involvement of users in a new product development process and obtaining the role of idea

generators by them have started to be actively emphasized by researches (Archer et al., 2004;

Prahalad and Ramaswamy, 2000).

Figure 3 shows mutual interaction between consumers. In the presented model consumers

manage producers through conversation.

Nowadays consumers interact not only with companies, but also actively communicate with each

other via various communication tools, like blogs, social web-sites, word-of-mouth conversation.

Moreover, customers do not passively listen to the companies; they express their own thoughts

and dictate their requirements (Bhalla, 2011).

Figure 3. Consumers manage producers through conversation (Lundkvist, 2003)

The second and the third figures represent customers’ transition from passive listeners and

simple consumers to active participants of a cooperation process with companies. The authors

P

C C

P

C C

P

C C

3

relate this phenomenon with the term customer-driven innovation which is relatively new.

Companies started to pay attention to it only in 1980th

(www.svpma.org). Technology-driven

innovations open the innovations’ evolution history and the second stage became customer, user

or as it is also named client-driven innovations. According to von Hippel et. al (1999) ―originally, user-driven innovation was tied to innovations

carried out by the consumer to increase the utility value of a given product, as opposed to a

company innovation, which solely serves a commercial purpose‖. The main point of customer

driven innovation and key distinction between customer and technology driven innovations is

that a customer became driving force in the process of product and service development.

Researchers state that cooperation with consumers helps to reduce costs and leads to higher

degrees of efficiency in the innovation process (Tether, 2002).

The ability to use customer knowledge acquires a substantial nature for the organizations in

order to create and deliver not only unique product or service that competitors cannot match, but

also to obtain absolute customer satisfaction. Companies use customers’ knowledge which is

incorporated in customers’ insights in order to create valuable products and services.

Nowadays the term ―incorporation of client insight‖ is very fashionable. It simply means the

importance for companies to listen attentively. Often, the best innovators not only understand the

behavior of their customers, but they investigate the motives behind this behavior: not only what

customers do, but also why they do it (www.masterbrand.ru). However, there are few companies

that use this particular opportunity for innovation. Starbucks is a good example of a company the

matches clients’ insight. Coffee was a simple commodity until the appearance of Starbucks with

a new concept, which will be further discussed in the paper.

In the thesis the importance of dialogue between company and customer in the contemporary

world is discussed, as it can lead to innovations, where customers are involved or even where

customers are initiators. The existing methods of communication between consumer and seller,

as well as factors that can be obstacles for this cooperation are analyzed.

1.2. Research design

A research design provides a framework for the collection and analysis of data. (Bryman, Bell,

2007).

The work on thesis is started with making a plan and timetable. The whole process is divided

into stages, such as identification of research area, formulation of research questions,

formulation of research strategy, research design, literature review, data collection, data

analysis, writing the first, second and final draft.

First of all, research area and level of analysis, or, in other words, primary unit of measurement

and analysis was identified (Bryman, Bell, 2007). The focus is made on relations between

organizations and customers that can lead to innovations.

Then, to formulate research questions and research strategy the Watson’s ―What, Why and How‖

framework for crafting research was used (Table 1).

Answering those questions a conclusion was made that the topic has more theoretical character,

nevertheless in order to investigate customers’ willingness and desire to cooperate with

companies the survey was conducted.

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In order to investigate the relation between customers and innovation descriptive research and

explanatory research were implemented. The first one helps to answer the question ―What is

customer driven innovation?‖ and the second one explains ―Why so much attention is paid to this

issue?‖

Table 1. A ―What, Why and How‖ for crafting research (Watson, 1994)

What? Why?

What do I want to know more about/

understand better?

What are my key research questions?

Why will this be of enough interest to others,

can the research be justified as a ―contribution

to knowledge‖?

How-conceptually? How-practically?

What models, concepts and theories can I draw

on/develop to answer my research questions?

How can these be brought together into a basic

conceptual framework to guide my

investigation?

What investigative styles and techniques shall I

use to apply my conceptual framework (both to

gather material and analyze it)? How shall I

gain and maintain access to information

sources?

Due to the specificity of the topic, it is hard to obtain any quantitative information concerning

customer driven innovation; thereby, qualitative methods were used for the investigation.

Bruman and Bell (2007) state that qualitative research strategy ―usually emphasizes words rather

than quantification in the collection and analysis of data and that predominantly emphasizes an

inductive approach to the relationship between theory and research, in which the emphasis is

placed on the generation of theories‖.

Strauss and Corbin (1990) claim that qualitative methods can be used for better understanding of

phenomenon. ―Qualitative methods can also be used to gain new perspectives on things about

which much is already known, or to gain more in-depth information that may be difficult to

convey quantitatively‖ (Strauss and Corbin, 1990).

Qualitative research, as well as quantitative, can have advantages and disadvantages.

According to Bryman and Bell(2007):

- Qualitative research is too impressionistic and subjective. ―Qualitative findings rely

too much on the researcher’s view about what is significant and important.‖( Bryman

and Bell,2007)

- Problems of generalization. ―When interviews are conducted with a small number of

individuals, it is impossible to know how the findings can be generalized to other

settings‖ (Bryman and Bell, 2007). As quite a small number of individuals (60

respondents) participated in our survey we would rather speak about tendency than

about behavioral pattern of customers.

In order to implement the qualitative research the steps, introduced by Bryman and Bell (2007),

were followed.

1. General research questions

The main research questions are:

What is customer driven innovation? What is innovation in this case and what does it

mean ―customer driven‖?

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What are the motives and benefits for customers and for company to cooperate with each

other?

To what extent customers are ready to cooperate with companies nowadays?

Which obstacles can limit cooperation between company and customer?

Whether there is a difference in cooperation between customers and companies in

different regions? To investigate this difference European and Post Soviet Union

Countries (Russia, Ukraine and Belarus) were chosen. The assumption was made that it

should be the difference in cooperation between customers and companies in Europe and

Post-USSR, as regions have different economical situations (Post-USSR are countries

with transaction economy), different mentality that in case of Russia, Belarus and

Ukraine is related to Soviet political and economical regime. An assumption was made

that customers in Europe are more active, creative and, hence, more innovative, than in

Post Soviet Union Countries.

2. Collection of relevant data.

First of all, collection of data in our case is reviewing the literature and what is already

known in the examining area, trying to find controversies, inconsistencies and

unanswered research questions in this area. Mainly scientific articles are analyzed in the

thesis.

Secondly, for the collection of data the survey is conducted by using questionnaire. Both

open-ended and closed-ended format questions are presented. Such types of questions are

balanced, as ―very open-ended research is risky and can lead to the collection of too

much data and, confusion about research focus‖. (Bryman, Bell, 2007).

The first draft of the questionnaire was made and 5 respondents tested it. Due to their

comments several questions were modified. As an example respondents ask for choosing

more than one answer among given options; hence such opportunity was included.

3. Interpretation of data.

First of all, collected literature was analyzed in order to find answers for our main

research questions and make questions for our survey.

Secondly, an analysis of our survey was made and obtained results were interpreted with

the help of examined concepts, frameworks and so on.

4. Conceptual and theoretical work.

In order to explain obtained results additional literature was examined and more data was

collected from respondents by asking them for clarifying their ideas or giving more

information about their experience.

5. Writing up findings/conclusions

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2. Theoretical Framework

The issue of cooperation between companies and customers is widely discussed but mainly from

the business to business perspective (Evans et. al., 2008, Gibbert et. al. 2002). Based on the

research findings ―customer participation affects new product value creation by improving the

effectiveness of the new product development process by enhancing information sharing and

customer-supplier coordination and by increasing the level of customer and supplier specific

investments in the product development effort‖ (Evans et al., 2008).

According to Desauza et al. (2008) customer-driven innovation is needed for the continual,

sustainable innovation. Nowadays, organizations change their strategy from ―innovating for

customers‖ and ―innovating with customers‖ to innovating ―by customers‖. Customer

Relationship Management (CRM) is gradually replaced by Customer Knowledge Management

(CKM), which objective is collaboration with customers for joint value creation (Gibbert et al.,

2002). Gibbert et al. state that ―CKM is about gaining, sharing, and expanding the knowledge

residing in customers, to both customer and corporate benefit.‖ Based on the examples of such

brands as Nokia, Dell, Starbucks, Hallmark, etc., which will be used in our paper, it can be

observed that companies increasingly involve customers into business process. Both companies

and customers benefit from collaboration. By creating cooperation with customers organizations

are able to get valuable feedback for the further development. In turn, consumers have an

opportunity to purchase co-created products. The role of a customer should not be

underestimated. Furthermore, customers’ cooperation with companies has to be motivated. This

issue would be discussed in the further sections.

In order to innovate, companies use such knowledge as the insights, ideas, thoughts and

information that are received from their customers (Desouza et al. 2008). Aforementioned

mental resources are processed by companies and implemented in new products and services.

Despite the fact that a process of cooperation is mostly characterized as essential and reasonable

it can be contested by researchers. Hamel and Prahalad (1994) argue that customers are usually

not able to imagine anything that does not exist due to the lack of prudence. That is why they can

only make suggestions how to improve existing products. Some authors even claims that

customer involvement can harm company’s positions on the market (Christensen and Bower,

1996). Ulwick (2002) adhere to critics concerning the way of cooperation between companies

and customers. The author claims that ―the traditional application of asking customers for

solutions tends to undermine the innovation process‖. Moreover, the author states that

―customers should not be trusted to come up with solutions‖ because they may have lack of

knowledge about product or be not able to formulate their preferences. As a result, the products

created in accordance with expressed idea might be not in demand. However, other authors state

that ideas provided by customers should be discussed and filtered by companies as well as by

other customers. For such purpose organizations have to create communities where those ideas

might be discussed (Desouza et. al.,2008).

Ulwick (2002) argues that research and development department should be responsible for a

development and creation of a product/service. What is needed from customers is the outcome in

the form of their expectations from products’ utilization (Ulwick 2002).

Von Hippel introduced the term ―user-centered innovation‖ which is also named as user-driven

innovation and is defined like ―innovation created by the user to obtain a higher user value as

opposed to commercial innovations taking place within companies.‖ User –centered innovation

is a synonym for customer-driven innovation as soon as the main factor for both terms is a

customer as a key factor for innovation.

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Modern customers have acquired new features: they are more knowledgeable and collaborative

and they want to be heard (Bhalla, 2011). Table 2 provides comparisons between the old and

new customer realities.

Table 2. A profile of the new customer (Bhalla, 2011)

Old reality New reality

Identity Consumers, respondents Real people, creative partners

Role Passive; consumers of value Active collaborators; co-

producers of value

Source of insights Surveys, dispassionate

objective observation

Conversations, stories,

impassioned immersion

Handshake with company Transaction-based Interactions and experience-

based

Location Fixed and invisible; at one end

of a long value chain

Adaptive and very visible;

anytime, anyplace

Information and influence Company advertising and

messages; expert opinion

World-of-mouth; peer-to-peer;

social media

Concept of value Company offers; one size fits

all

Customer determines; tailored

and unique

Primary source of value What’s in the brand; attributes

and features

What customers do with the

brand; unique solutions and

customized experiences

The role of customers was changed from passive to active collaboration. Customers became co-

producers of value, not just simple consumers. Traditional sources of insights, such as surveys

and observations were modified to conversations between companies and customers, listening to

customers’ stories, experiences and drawing ideas from them. Nowadays customers obtain

information not only from brands’ advertisements, but also through word-of-mouth

conversations, usage of social media and peer-to-peer discussions. The concept of value in the

table shows that customers do not adapt to companies offers; they dictate their own determinants.

Unique solutions that brand can provide became more important than its attributes and features.

The firm-centric and product-oriented way of thinking was successfully used by companies in

the past decades. Nevertheless, with the change of customers’ minds, organizations are

compelled to modify their policy towards consumers. As Bhalla (2011) states ―customers feel

that companies should be talking to them because they believe they can help companies figure

out what they really want.‖

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3. The process of value co-creation

3.1. Building a co-creation capability

Nowadays customers as end-consumers are considerably highly involved in a process of product

development or in other words – value creation (Bhalla, 2011).

Figure 4. Framework for Building a Co-creation Capability (Bhalla, 2011)

Figure 4 represents four components that a company has to use in order to build a co-creation

capability with customers. The cooperation starts with listening customers. Organizations

express a wish to have a conversation with customers; however, it is hard to have a successful

dialog without listening. Although, listening is not the only requirement for the fruitful

cooperation, high attention and responds are an integral part of the dialog between company and

customers (Bhalla, 2011).

The next stage is customers’ engagement. An organization can implement it through physical

spaces, digital arenas, or through both (Fig 5). In case of engagement in physical spaces a

company has an option to engage customers either individually or in groups. If a company chose

to engage customers through digital arenas it should decide whether to engage them in customer

community through company-sponsored sites, social media sites, or through both (Bhalla, 2011).

Figure 5. Engagement Arenas and Options

Customers engaged in:

Physical Spaces

Digital Arenas

All

Individuals

All

Groups

Customer

Communities

Social

Media Sites

Access:

Initiation

Only

Access:

Open to All

9

Finnish communications corporation Nokia can serve as an example of the active cooperation

between company and customers through digital arena. Nokia is the world’s leading mobile

phone supplier which is proved by the fact that in 2010 it ranked 8th

in the list of Top Global

Brands (www.interbrand.com). In 2007 Nokia has built NokiaBetaLabs – the web-site that works

as a link between company and its customers under the motto ―Try what you like. Say what you

think‖. The company invites customers to provide ideas and suggest improvements to make its

products better (www.betalabs.nokia.com). BetaLabs collaborators listen to customers’

suggestions and give lives to those that seem to be reasonable. Nokia example let us make a

conclusion that interaction with customers and understanding their needs gives company tangible

advantages.

Next step is an external respond. On this stage companies have to create means for co-creating

value with consumers and provide respond to their ideas and suggestions.

The last link in the co-creation capability framework is an internal respond when a company

invests in co-creation structures and processes. The task for a company on this stage is to

organize the work within its own borders in such way so that it would be able to cooperate

effectively with consumers.

3.2. Customer involvement into the process of cooperation

Customers can share their ideas and suggestions with other individuals and organizations

through interaction in a co-creation process.

Figure 6 represents interaction model between company and customer and describes co-creation

research framework (Füller, 2010). It examines value co-creation from the perspective of virtual

cooperation; however, presented stages appeared to be inherent in all processes of cooperation

between company and customers.

Figure 6. Co-Creation Research Framework (Füller 2010)

The first component of the framework concerns the type of customers that should be involved

into the co-creation process.

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People have different creative potential and their desire to collaborate with organizations varies

as well. Companies can be faced with a dilemma with which customers they should cooperate.

Bhalla (2011) states that usually companies tend to collaborate with consumers ―who have

extraordinary passion for their brands‖. Moreover, organizations have an option to cooperate

with end-users that are full of passion, ideas and creativity, although they are not specially

trained for co-creation process. Another alternative is to bring specially trained professionals into

the collaboration process. Hereby, Bhalla (2011) devides customers into the following

innovation categories:

Innovators and early adopters. This is the most active group of customers who are craving for

novelties in a product and service field. They are among the first who try new products and

services.

Lead users. Lead users are active as well, however they are more concentrated on special product

categories, trends and they commonly are looking for a solution of their needs. Bhalla (2011)

mentions that lead users are the most attractive co-creation source as they seeking for developing

solutions to satisfy their needs.

Professionals. Professionals are not always product end-users. They are specially trained for

cooperation process, hence they can provide highly valuable inputs for companies.

Kristensson et. al. also distinguish such customers’ group as ordinary and advanced users. The

ones who belong to the first group are characterized as more creative and ideas, provided by

them, are considered to be more valuable. However, the research results show that advanced

users as well as professionals express more realizable ideas comparing to ordinary users.

(Kristensson et. al., 2004)

Experts give a recommendation to pay attention to the innovation behavior of consumers and

involve those who demonstrate a high co-creation potential (Bhalla, 2011). Through

collaboration with such category of customers organizations are able to enhance the

effectiveness of the cooperative innovation process.

Companies can decide with whom they tend to cooperate, although the co-creation process does

not happen by itself. A company has to organize, manage, and facilitate it (Bhalla, 2011). In

some cases organizations can engage external partners like special agencies that assist

collaboration process.

The second component represents the task for companies to identify what are the incentives for

cooperation between them and customers. In the issue of a particular participation, like in open

source software development activities, customers can see a tangible benefit by immediate using

co-created programmed code. However, it often happens that after participating in a new product

development, like virtual co-creation, consumers will hardly be able immediately use the

innovation and benefit from it (Füller, 2010).

Various researches are devoted to the topic of benefits that customers can gain from cooperation

with companies. Füller (2010) states that ―consumers interact with producers and engage in co-

creation activities during new product development because they expect that doing so will be

rewarding‖. The assumption from his description can be made that rewarding is a motive for the

value co-creation.

Researchers provide different classification of benefits that customers can get from collaboration

with companies. Several types of classification are exemplified in order to trace and highlight the

common features.

Füller (2010) divides customers’ motives for cooperation into intrinsic and self-determined

extrinsic motivation. If the outcome is more valuable than the activity, customers are driven by

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extrinsic motives such as learning, reputation or payment. Intrinsic motives, like fun, kinship,

and altruism come to the fore when the focus is on the activity by itself.

Bhalla (2011) provides the following motives for customers’ cooperation with companies:

Self-image. People participate in a co-creation process because it influences their self-image. For

example, mothers take part in the Hallmark’s digital communities and share their ideas because

they feel pleasure to be heard and taken seriously. They are proud to see that the company accept

their ideas and put them into practice (Bhalla, 2011).

Belonging. According to Bhalla (2011), the ability to be a member of a group and be involved

into its activities is a reward in itself, hence represents a motive for collaboration with

organizations.

Consumption. The sense of being among the first users and owners of a created product is one of

the motives for customers to devote their time for participating in a co-creation process.

Need for a Solution. Some people are just looking for a solution of a particular problem or need.

In such case, participation in a co-creation process is driven by a need to find a solution.

Supporting Causes. Customers can cooperate with companies when it comes to supporting

issues, like fighting against global warming by buying environmentally friendly products.

Monetary Rewards. Material incentives are among the most important factors that stimulate

customers to collaborate with companies.

Baron and Nambisan (2009) investigated the topic of customers’ voluntary participation in a

value co-creation. It appeared that there are 4 categories of benefits that people may get from

voluntary participation in a virtual customer environment (VCEs): cognitive, social integrative,

personal integrative and hedonic (Table 3).

Table 3. Categories of customers’ benefits from participation in VCEs

Cognitive or Learning Benefits

Participants benefit from the acquisition

of new knowledge. Can be expressed in

a form of familiarization with a product,

gaining knowledge about its usage.

Social Integrative Benefits

Benefits that customers gain from

interaction with relevant participants;

increase of a sense of social identity

Personal Integrative Benefits

Contribute to enhancing of individual’s

status and confidence

Hedonic (Affective) Benefits

Gaining aesthetic and affective

pleasure from collaboration

Analyzing provided classifications, it can be seen that customers can collaborate with companies

either voluntary or on a fee basis. If customers participate in a co-creation process on unpaid

base they are driven by desire to strengthen either their knowledge in a particular sphere or

increase aesthetic, moral pleasure. Monetary reward might be at high importance for consumers,

although Füller (2010) notifies that providing the monetary reward may be dangerous.

Customers can participate in co-creation process just in order to get paid and ―strive to do the

least possible of the task for the most possible of the reward‖ (Füller, 2010). Another obstacle

may be that monetary reward can influence rs’ intrinsic motives. According to Füller (2010), if

customers understand that they are able to earn money with the help of their ideas it can cause a

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thought that they should not share them with a company and they would tend to sell them for a

higher profit.

Third component of the framework relates to the customers’ expectations concerning the object

of their contribution. It is important to determine which kind of product customers are ready to

contribute to: whether is it a particular product or a product category.

Forth component is an understanding how customers should be involved in the process of value

creation. Intensity and extent of customers’ participation in a co-creation may vary considerably.

An important task for the company is to determine the required time span for cooperation and

make sure that customers are able and highly interested in participation on determined terms. On

the one hand, customers might be not bargain for the long-term collaboration and their

contribution is initially limited. On the other hand, it can be essential for people to be involved in

a co-creation process during all stages. In such case one would agree to cooperate only in terms

of entire involvement in a co-creation process.

To some extent the power of tools can also have influence on consumers’ desire for cooperation.

Customers may more willingly cooperate with the companies that possess tools which give a

possibility to implement their ideas and create desired solutions.

The fifth component implies the determination of a partner for cooperation. During the process

of value co-creation customers are usually able to interact not only with a company but with

other customers as well; thereby, communication with like-minded people might be an additional

stimulus to participate in co-creation.

A type of the company for cooperation is another important aspect as well as the kind of

product/service the person works with. Some customers tend to cooperate only with well-known

or/and preferred brands. Based on our survey it can be stated that there are customers who, on

the contrary, are inclined to work with small and not so ―well-publicized‖ brands. Such

preference is based on the assumption that smaller companies provide closer cooperation and

probability of implementation of customers’ ideas is higher.

To sum up, organizations should carefully consider all aspects of collaboration with customers.

They should decide with which customers to collaborate, what is basis and how to structure the

process of cooperation. If all abovementioned tasks are taken into account, the company has

more chances for the prosperous collaboration which leads to the creation of desired products

and services and, hence strengthens their market position.

3.3. Customers’ complaints as a source of innovation

Every day people all over the world are dissatisfied with products, services and so on.

Dissatisfied customers have two options: they can complain or walk away. Still, the vast

majority of dissatisfied customers do not complain to the companies (Voorhees et. al., 2006).

Many companies tend to avoid complaints. ―Complaining has never had a positive meaning. It

comes from the Latin verb plangere, which originally meant ―to hit‖—metaphorically ―to beat

one’s breast‖ (Barlow, Moller, 2008).

Some companies have changed their attitude to complaints. They realized that complaints are the

mean of communication with customers. It is hard to find a customer who call the company and

chat if she does not have any problems. ―Customers practically have to be bribed to get them to

fill out survey forms. But when a complaint situation occurs, there is at least a small chance that

customers will talk with us directly‖ (Barlow, Moller, 2008).

13

It is more beneficial for companies to cooperate with customers who are not silent and, hence

organizations should inform their customers that complaints and feedback are appreciated

(Bhalla, 2011). Simply speaking, complaints can help the company to gain information about

expectations that have not been satisfied and about customers’ future expectations or ideas about

product or service. As customer expresses her expectations and in such way gives business ideas,

then complaints can serve as source of customer driven innovations.

According to Barlow and Moller (2008) customers commonly are not tending to generate

innovative ideas for companies. But with the help of customers’ feedback, company can define

demands of particular group of people.

Barlow and Moller (2006, 2008) in their book ―A Complaint as a Gift‖, provide examples of

Motorola, Quick Park, Inc., Frigidaire to support the idea that complaints are ―one of the most

direct and meaningful ways customers can express their dissatisfaction to companies and one of

the most direct and effective ways for customers to tell businesses that there is room for

improvement‖. Companies should not be passive, and what is more, make efforts to learn more

about complaints and what their customers think about their products or services.

Motorola, one of the first companies who won Malcolm Baldrige National Quality Award,

every month organizes meetings in order to discuss technical problems or other weak points. On

those meetings it is prohibited to speak about positive sides, only negative. Motorola users are

welcome to introduce their complaints. It was noticed that customers make claims that for some

reason they cannot express in the shops. That is why Motorola does not wait when customers

start to complain to obtain necessary information. The company has made one step ahead having

direct contacts with their customers, what can lead to customer driven innovation.

Furthermore, companies may never meet customer needs until product or service failure

happens. Through complains customers can tell which disadvantages the product has or why it

does not meet their expectations. Sometimes only with the help of complaints companies can get

information about themselves and about their weak points.

Quick Park, Inc., company that manage a large number of car parks in USA, knows how

important is to listen to customers’ complains in order to be successful. Considering car owners’

complaint that exit from the box takes too much time, Quick Park made some modifications that

provided unhindered movement of cars. Introduction of new technologies let the company to

satisfy car owners requirements and save almost 500 000 dollars every year.

Company Frigidaire invented new type of wrapping, that immediately reduced number of

customers’ complaints about damaged part of product in the sequel, due to simplification of this

system, Frigidaire had ten times saving and released available area in their factory.

If the complaints are not expressed, then advanced companies who realized the importance of

complaints, have to be creative in order to obtain customer complaints and comments. Some

organizations conduct customer surveys to learn about complaints.

It is important for companies to be able to listen to customers and be flexible. Most of companies

still do not like to hear complaints and start to create psychological blocks to avoid them.

Moreover ―many organizations continue to pay bonuses to their managers based on reductions in

complaints‖ (Barlow, Moller, 2008). Sometimes such kind of policy can lead to unpredictable

consequences.

A certain hotel chain introduced cards of complaints in order to be familiar with customers’

dissatisfaction and consequently improve service. Manager of each hotel collected cards and

then sent to head office. In the same time reduction of complaints was rewarded by bonus

14

payment. After the project was launched, it was figured out that the hotel with the lowest

number of complaints had the dirtiest rooms. Later this hotel was closed by Health Department.

This example supports the idea that organizations should encourage their staff to provide

complaints instead of trying to avoid them. If a company’s goal is to have fewer complaints, it is

easy to accomplish. As in case with abovementioned example, the hotel staff can simply not

report all complaints he has to management.

It is a great opportunity for company to increase its value focusing on customers who were not

happy. If a company is interested in customers, then ―customer dissatisfaction should be of

central interest‖ (Barlow, Moller, 2008). Complaints are kind of feedback information that can

help companies to be innovative, to change organizations’ strategy, style or market focus to meet

customers’ requirements and expectations.

3.4. Obstacles for cooperation between customers and companies

In order to be competitive, hold and expand market share, even successful companies should be

continuously creative, keep pace with progress or, in other words, be innovate. Naturally, it is

not an easy process that is why it demands a lot of efforts. Companies face different obstacles or

barriers that may hamper the innovation process. First of all, companies may encounter the high

cost of innovation that they cannot afford due to different reasons, like lack of financing for

innovation purposes, difficult financial situation of the company etc. Companies also can

experience lack of information, technology and skilled personnel.

Some companies may claim that ―we know our business better than our customers do‖(Gibbert,

Leibord, Probst, 2002). Also organizations can be afraid that ―consumers might steal the idea and

sell it to the competition‖ that is why if they involve customer, they do it in the last phase

―because of confidentiality issues‖ (Janssen, Dankbaar, 2008).

In case of customer driven innovation, information obtained from the customers, is the most

valuable and significant part of the whole innovation process. The main barriers that hinder this

type of innovation are associated with obstacles for cooperation between companies and

customers.

As two parties are involved in cooperation process, so each side may have their own reasons

which prevent them to cooperate. Customers have reasons that not only prevent them to

cooperate, but also reasons for innovation resistance.

Innovation is commonly perceived as something new, modified or improved, hence consumers

may associate it with changes in their day-to-day life, existing workflows, habits and so on.

Consequently, consumers can be afraid that they have to learn how to use new product or service

and they try to postpone adaptation of innovation.

According to Ram and Sheth (1989), there are four types of risks, associated with innovation.

The first type is physical risk. Customers can have a perception that innovative product has not

been approved by significant number of people, hence be afraid that innovation can be harmful

to person or property. Pharmaceutics can serve as example of such caution, so far as drugs can

carry physical risk as they are designed to affect the body. ―Farmers are unwilling to experiment

with new insecticides, fertilizers, and herbicides for fear of soil damage. In fact, this fear of

physical risk extends to all processed foods‖ (Ram, Sheth, 1989).

The second type of risk is economic risk. Customers know that new products are usually

expensive; thereby, apprehension of loss of money can appear. For example, if new camera or

15

computer appeared, people tend to wait till ―the better product with a lower price tag will soon

be on the market‖(Ram, Sheth, 1989).

The third type of risk is functional risk. This type of risk is similar to physical risk, although it is

more focused on how the product works or functions, not on harmful consequences. New cars

may generate feel of uncertainty, because customers do not know how a new car will perform.

The last type of risk is social risk. Customers may avoid innovation because they feel that it

conflict with their principles and views (for example, buying genetic modified food).

Nevertheless, there are people who are not only aware of new products, but also have their own

ideas or suggestions for companies; however, due to various obstacles, company might never

know about such ideas.

The findings of the conducted by authors survey shows, that some customers feel uncomfortable

when they need to contact somebody, even if they have claims or suggestions. It is very difficult

to obtain any kind of information from such category of customers. Other can claim that the

probability that the idea would be accepted (implemented by the company or at least that

somebody would pay attention to it) is very low and they even do not want to waste time trying

to reach the company. An additional obstacle for cooperation is that customers simply do not

know whom they may contact to propose their ideas.

Moreover, according to Forbes.com, 47% of customers say they do not believe company

executives understand their experiences and 41% of the customers who take the time to express

their thoughts do not think companies listen to or act on their feedback (www.forbes.com).

Customers are not always ready to share ideas with the company. Firstly, depending on ideas and

possibilities, the innovation can be implemented by themselves. Secondly, in accordance with

our survey, a significant amount of respondents are ready to cooperate with a company if

monetary reward would be provided.

In turn, the company has its own barriers for cooperation with customers.

Companies create different channels, like help desks, call centers, websites, portals on the social

network sites, where customers can leave their complaints and feedback. New communication

technologies in some way simplify the communication between company and customers.

Companies can obtain feedback from consumers all over the world. However, some companies

simply do not have a good system or infrastructure for gathering their customers’ feedback, they

do not determine clear goals and they do not create any strategy for selecting or even evaluating

ideas. Good idea can be lost because, for example, call centre representative may not know how

to implement it, or who to pass the idea. And this is a considerable obstacle that customers’ ideas

are not captured through the channels, which were created for this purpose.

Companies may argue that too much effort is needed for working with customers’ ideas,

although the result can be insignificant. Examples of successful companies like Starbucks,

Nokia, Hallmark and Dell show that it is vital not only to hear, but also listen carefully to

customers and interpret what they are saying in a right way. An absence of listening and

responding is an obstacle that every company should avoid in order to be competitive and

successful.

16

4.Customer-driven innovation process: Practical implementation

Customer-driven Innovation consists of several steps, qualified implementation of those leads to

satisfaction of customer needs. On the Figure 7 in the form of stairs are shown main steps of

customer-driven innovation.

Figure 7. Customer-driven innovation process (Rosted, 2005)

1. Customer observation stage

It is necessary to take into account that customers could be companies and end-users or ordinary

consumers. If customer is a company then close dialog between companies is the best way of

observation and understanding of needs. If customer is an end-user then there are a lot of tools

for decoding and analyzing needs: surveys, interviews, focus groups and so on. Using different

types of investigation of customer needs company can achieve it main aim- identification of a

new customer need.

One of the ways to investigate customers’ needs is to create customers communities (Bhalla,

2011). Hallmark Cards, the largest American manufacturer of greeting cards, adheres to the idea

that the innovation should be provided not by the company staff but by consumers. Hallmark

claims that ―consumer-led innovation had a better chance of succeeding than company-led

innovation‖, despite the fact that it employs bright and talented workers for the collaboration

(Bhalla, 2011). To support this idea the company created Hallmark Idea Exchange (IdEx), an

online community for its consumers. The principle is that participants cooperate with the

company not less than a half hour weekly, express their ideas, discuss their needs and product

preferences, providing in such way a critical insights into Hallmark’s customer base. Hallmark

states that its online community generates about 10 to 15 concrete ideas every month, part of

which are implemented by the company (Pierce, 2008).

An organization should collect ideas from their customers, filter and test them and implement in

the sequel; so that consumers are involved in the process of product design and development. An

important task for the organization is creation of environment where provided ideas can be

discussed by others (Desouza et al. 2008). Starbucks brand represent example of such operation

with its My Starbucks Idea project.

17

1987 year can be named as a starting point of Starbucks’ operation. Nowadays the total number

of stores is 17 009 (as of January 2, 2011) in more than 50 countries (www.starbucks.com).

Wide range of drinks, sophisticated artwork on the walls and jazz or opera music in the

background in the stores can be mentioned as Starbucks’ distinctive features. Nevertheless, tasty

drinks, cosy atmosphere and friendly staff are not the only factors that contribute to the

company’s success. As a result of careful attention to all aspects of human consumption of

coffee, the company almost single-handedly invented a new category in the U.S. market, and not

only force customers to buy more status (and more expensive) product, but also a totally new

place for meetings, which became part of a human life style.

In 2011 Starbucks has been ranked 3rd in the Top 100 Social Brand List by the HeadStream

company (www.socialbrands100.com). Companies were evaluated by the following criteria:

1. Active listening. ―The active element of listening takes brands away from being

observers, to more valued contributors within a community‖(www.socialbrands100.com).

The use of social brand outposts such as Facebook, Twitter, YouTube and local social

networks was taking into account.

2. Appropriate social behavior which implies a consistency of companies’ ―social

promises‖.

3. Win-win relationships. If a brand position itself like a social one it has to understand that

being social is not a campaign, but a commitment.

MyStarbucksIdea is an illustrative example of the brand’s social activity. The concept consists of

4 steps: share, vote, discuss and see. The brand has created the on-line platform where people

write their suggestions that are primary discussed by other customers. Further, company experts

analyze public opinion and implement those ideas that seem to be successful. ―We're here, and

we're ready to make ideas happen‖ – claims Starbucks Company and sticks to its word

(mystarbucksidea.force.com).

However, the idea of MyStarbucks project was not invented by Starbucks Company. Howard

Schultz, the CEO of Starbucks, has followed DELL’s IdeaStorm.com. Both companies are based

on the "Ideas" software platform from the CRM company - Salesforce. Salesforce Chairman

Marc Benioff describes the platform like ―a live focus group that never closes‖

(www.businessweek.com/magazine).

Customers are the main creators and, moreover evaluators of the ideas that are further

implemented by Starbucks team. An important issue is to understand by which incentives are

people driven when they participate in the ideas creation process. Chris Bruzzo, Starbucks' chief

technology officer says that ―customers who are on MyStarbucksIdea ought to participate in

being accountable for it. Whether an idea is accepted or not, customers get only the satisfaction

of participating; there are no payments or other tangible rewards‖ (www.businessweek.com). So

that it appears that a sense of pride because of participating in a co-designing process can be

enough for customers in order to cooperate with the brand.

At the same time Starbucks has launched My Starbucks Visit platform through which the

company can get customers’ feedback (www.mystarbucksvisit.com). My Starbucks Visit invites

customers to fill out surveys, leave their comment, thereby being able to win cash prizes and get

coupons for free coffee or tea. In this example company provides a kind of tangible reward

which serves as a motive for customers to cooperate with the brand.

18

2. Developing and designing new solutions and concepts stage

After the identification of customer need, company designs possible solutions that may satisfy

those needs. It can be totally new product or service, modification of a product or combination of

existing products and creating the new one. It is important that solution should change the

competitive situation in the market. All companies tend to find solution that other companies and

competitors cannot copy.

3. Investigation of production capabilities

The commercial success of the innovation or product depends on the price that consumers are

able and agree to pay. That is why analyses of available production facilities, technologies and

their costs are essential part of innovation process.

4. Assess market opportunities

To be successful on the market company should not only identify customer needs, design

solutions, analyze production capabilities and market product at a reasonable price, but also

assess the commercial potential of the product, as well as predict the possible actions of the

competitors and their ability and desire to copy a product.

5. Designing innovation strategy

If surveys and assessments show that the product will be in demand, and in case of customer

driven innovation, the success can be almost 100% if company can read insights, can listen and

understand consumers than the production should be launched. If solution requires small

contribution or change of an existing product, then, probably, there is no point for this

innovation. But in some cases it is very difficult to predict the potential of innovation. To deal

with innovations is risky, but avoid innovation can be even more risky. Kodak example can be

provided. This brand has realized too late prospective possibilities of digital photography. The

sphere of digital photography has become a separate kind of business. Nowadays, when people

think about digital camera, to their mind will, probably, come any other brand: Sony, Canon,

Casio, Samsung, but not Kodak. Some years ago, the brand was associated with traditional

photography, although Kodak reacted too late to market trends, and as a result lost their position

(www.iteam.ru).

6. Implementation

The last step in the innovation process is implementation or introducing the product. It may seem

as the simplest part, but on this stage company also has to be sure that all details are considered

and the product can easily reach their customer.

19

5. Empirical investigation

Empirical investigation in our research is based on 60 questionnaires which were collected in

order to examine the following issues:

To what extent customers are ready to cooperate with companies nowadays?

Which obstacles can limit cooperation between a company and a customer?

Which motives appear to be main for customers during the process of value co-creation?

Which benefits customers can get from cooperation with companies?

Whether there is a difference in cooperation between customers and companies in

different regions.

5.1. Survey analysis

Investigation was conducted with the help of electronic and printed questionnaires that consist of

opened and closed format questions (see Appendix 1). It was decided to analyze a tendency for

cooperation in Europe and Post Soviet Union Countries (Russia, Ukraine and Belarus) in order to

examine whether cooperation between customer and companies vary depending on the region.

Respondents were selected randomly – 30 people from Europe and 30 people from Russia,

Ukraine and Belarus. Our target audience does not have any specific portrait; the only criterion

was age range from 20 to 35 years as we assume that this category of respondents is more active

and the probability of their cooperation with companies is higher.

Respondents were asked to answer 11 questions related to the topic of cooperation between

companies and customers. For some questions respondents were able to choose several answers

among given options. Thereby, the results of questions are presented in the percentage form and

show the importance for respondents.

We used 5-poined scale to investigate how people evaluate companies’ attempts to cooperate

with customers, have a dialogue with them. By choosing the grade that approaches to 1

respondents claim that nowadays companies actively tend to have a dialogue with customers and

try to listen to them. In contrast, pointing grade 5 respondents mean that companies do not

attempt to cooperate with customers.

Figure 8. Level of companies’ attempts to cooperate with customers

0

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Level of perception, how companies tend to listen to customers**1- always listen; 5- never listen

Post-USSR

Europe

20

As it is shown in the Figure 8, 53% of respondents from Post-USSR and 40% respondents from

Europe chose the option 2, which means that they think that companies tend to have a dialog and

listen to customers. Nevertheless, there is significant part of respondents, around 22%, who think

that companies do not pay enough attention to the cooperation with customers.

More than 50% of respondents from both regions wrote that they had ideas concerning creation

or modification of products/services (Fig.9). An important fact is that 12% of respondents

commented that they would not like to share their ideas with companies as they consider them as

highly valuable source and want to keep the ideas for further implementation by themselves.

Figure 9. Presence of idea concerning the modification of a product/service

Respondent from Belarus - Edgar (24 years old) said that he had an idea concerning the

improvement of electrosurgical complex and medical microscope, but because of problems with

his partners, he cannot implement his idea, and he does not want to give this idea to other

company for free.

Taking into account such replies, it can be said that a significant task for companies is to provide

considerable motivation for customers in order to arouse their interest for cooperation.

Respondents were asked by which means they would attempt to express an idea about the

creation or modification of a particular product if they had one. 80% of Post-USSR and 87% of

European respondents answered that they would try to do it through the company web page.

Such result means that companies are required to have a web site and, moreover, to create a

section for comments and suggestions in order to let customers reach them. 15% of Post-USSR

and 12% of European respondents answered that they would call customer service. Several

respondents said that they would like to talk directly to manager or Chief Executive Officer

(CEO) of the company. A few respondents mentioned that their ideas are highly valuable source

and they are not going to share them with organizations. They would keep them and try to realize

in the future or to sell ideas to company, not give it for free.

The Spanish respondent – Hector (26 years old) commented: “It is different about products and

service. Service is more about improvement, so people can share it. If it’s about product – it is

business idea and people can earn money with it”.

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Unwillingness to share ideas with companies can be one of the obstacles for cooperation.

Respondents were asked to choose one or several among given options or provide their own

opinion about obstacles limiting cooperation between a company and customer. According to

Figure 10, the majority of respondents think that the probability that the idea, offered by

customers, would be accepted is very low. It means that even if customer has an idea or

suggestion, and want to share it with company, she may doubt to contact the company.

The respondent from Russia – Ksenya (23 years old) had an idea to create a face-cream for

combination skin, consisted of 2 parts (for oily and dry skin), like a bottle with 2 parts in order to

optimize care for different types of skin on one face. But she said: ―I do not believe that it is

possible to reach the company and suggest them something, so I never expressed my idea”.

Respondent from Belarus -Sergey (24 years old) mentioned his experience with Sony Ericsson.

He described in details his suggestion on the company’s web page, but had never got an answer.

This example confirms perception that the probability that a company would accept consumer’s

idea is very low.

Figure 10. Obstacles for cooperation between companies and customers

Moreover about 70% of representatives do not know whom they may contact to express their

thoughts. It means, as well, that company may lose ideas. It should be mentioned that

representatives from Europe feel more comfortable to contact company, than representatives

from Post-USSR. The assumption is made that this can be explained by the fact that in USSR

times, in terms of planned economy, people were not used to cooperate with a company or

express their complaints. That is why about 20% of people still feel uncomfortable to contact a

company.

0102030405060708090

100

customers do not feel comfortable

to contact a company

the probability that the idea

would be accepted is very

low

customers do not know whom they

may contact to propose their

ideas

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Post-USSR

Europe

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Complaints can serve as a source for innovation. The number of people who did not express their

complaints is quite big: 37% and 38% in Post-USSR and Europe respectively (Fig.11).According

to Barlow and Moller (2008), in general, organizations tend to reduce the number of complains,

but smart companies should perceive complaints as a gift. They should not lose the opportunity

to listen to complaints, as there can be fresh business ideas in some of them.

Figure 11. Expression of complaints among respondents

Respondents were asked to choose among given options how freely they can express their

complaints. Figure 12 shows how the offered choices are divided between respondents.

Figure 12. Customers’ ability to express complaints and suggestions

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expressed complaints

unexpressed complaints

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I feel I could freely express my claims

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expressing complaints

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company responds

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23

The majority of survey participants from Post-USSR and Europe are able to express their claims

freely: 47% and 53% respectively. At the same time approximately 30% of respondents from

Post-USSR and Europe are ready to express their complaints, however company’s respond

should be more or less guaranteed. Finally, 13% of respondents from Europe feel uncomfortable

expressing complaints, and 23% of respondents from Post-USSR feel uncomfortable expressing

complaints, what can be explained by Post-USSR past, where people were not used to express

their complaints because of existing political and economical regime. The reason for the

discomfort in expression of complaints for both regions can be explained also by existing

obstacles that limit cooperation between customers and companies which were mentioned above.

Respondents were asked through which channels they would express their complaints to

company (Fig 13). There was an option of multiple answers for this question.

Figure 13. Channels through which customers can express complaints

The majority of representatives from the Post-USSR – 88% and Europe – 67% replied that they

would do it through the company web page. Moreover, the survey shows that respondents

unanimously consider that it should be an area for complaints and suggestions on the company’s

webpage. 64% of respondents from the Post-USSR said that they would do it with the help of

Book of complaints in comparing to the 10% of European respondents. Such tendency can be

explained by the fact that existence of a Book of complaints is more common in Post-USSR and

is not so typical for European countries. In turn, 38% of European representatives chose forums

as a source to express complaints and 33% pointed helpline. For the Post-USSR representatives

the answers are divided in the following way: 28% pointed forums and 24% chose helpline as a

source of expression of their complaints. There are multitude forums in the Internet where

customers discuss their thoughts concerning products or service. Those kind of forums are

usually created not by companies, hence they cannot influence discussions. Taking into account

such tendency, the conclusion can be made that companies should provide their own sources for

expressing complaints (like special section on the web page or helplines) in order to be able to

manage them.

Fairshopping idea (www.fairshopping.se) is an example of the web site, where companies can

create their own profile for communication with consumers. Fairshopping was primarily

designed as a source for people to express their complaints. Nowadays more and more

organizations join Fairshopping, thus becoming closer to consumers (Burman, 2010).

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company web page

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helpline other

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24

One of the aims of the survey was to observe a tendency of cooperation between companies and

customers (Fig.14).

Figure 14. Cooperation with companies among respondents

The majority of respondents do not have an experience of cooperation with companies in

creation or modification of a product. Only 14% of respondents from Post-USSR countries and

10% from Europe respectively replied that they collaborated with companies before. Such

tendency can be explained by the presence of obstacles in cooperation between companies and

customers. Moreover, the assumption can be made that organizations do not show high activity

concerning cooperation with customers and have lack of channels for collaboration.

As representative from Turkey Görkem (25 years old) commented ―Companies should organize

idea competitions (for example among students) and implement the best ones. I would like to

participate in such kind of action!”

Relied on the results of our survey customers’ incentives for cooperation with companies by

their relevance can be disposed in the following way (Fig.15).

Figure 15. Customers’ incentives for cooperation with companies

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A sense of satisfaction, that provided idea is implemented, is chosen by respondents as the most

important incentive. This factor belongs to the category of intrinsic motives. ―Consumers are

intrinsically motivated if they value an activity for its own sake‖ (Füller 2010). Füller also states

that intrinsically motivated consumers seem to be more interested in further cooperation with a

company.

On the second place monetary incentive is located. People desire to get ―tangible‖ reward for

their efforts. This fact can be supported by comments of respondents.

Representative from Belarus - Alina (23 years old) commented: “I don’t think that lots of people

want to share their ideas for free because ideas cost a lot nowadays”.

The third place is obtained by the factor ―sense of pride because of participating in a co-

designing process‖. In this case people value the process of cooperation by itself and tangible

reward is not so important.

A few respondents mentioned other kind of incentives that would like to get from participation,

like adding their names into the product’s name or logo.

Representative from Turkey – Görkem (25 years old) mentioned: “I would appreciate if a

company I cooperated with gave my name to the product, or mentioned that I was a co-creator.

It’s more important than monetary reward”.

In the last question the respondents were asked to provide an example from their own experience

or from experience of their acquaintance, when a company reacted to customers’ desires or

suggestions. In this part we got several replies, which are described below.

The respondent from Russia – Natalia (24 years old) stated that her suggestion was to add French

language to the menu in the Greek restaurant as soon as there were just Greek and English

options. In one month one of her friends told her that the restaurant implemented the provided

idea.

The respondent from Spain – Hector (26 years old) described the situation when the hotel asked

him for a feedback via e-mail. He replied with the several comments concerning the hotel’s

service and how it can be modified. ―Surprisingly they answered me in details in a few days‖, -

writes Hector. ―They implemented my ideas, plus gave me bonus - 3 nights for free‖. When

surveyors asked him, whether the bonus was the main benefit, he replied that he did not expect

any reward for his suggestions and was more happy about the fact that ideas were implemented.

Based on the answers the conclusion can be made that there is no considerable differences

between answers of representatives from different countries. Such tendency can be explained by

the phenomenon of globalization which affects both: companies and customers. Companies are

able to observe each other and adopt an experience of their competitors. Organizations can

implement similar tools for customer attraction. As an illustrative example companies’ web

pages can be mentioned. Consumers all over the world can find similar features on the brands’

web sites, like general information about company, its services, contacts etc. In turn, customers

all around the globe are connected through the Global Network, hence they share and imitate

common behavioral patterns.

5.2. Limitation and validity of research

There are always particular limitations in any kind of researches (Malhotra, Birks, 2003). It is

important to mention certain limitations of the presented survey.

26

The number of respondents was limited by authors to 60 persons. Such decision is explained by

the time limit factor and necessity to be able to conduct further deeper interview for obtaining

more details. There is a probability that respondents may answer superficially especially if the

questionnaire takes a long time to complete; thereby, the amount of questions contained in the

questionnaire is narrowed.

According to Bryman and Bell (2007) the degree of reliability is not very high if the research has

been conducted only once. Therefore, to achieve higher reliability, the survey has to be repeated

and showings should be similar to those obtained in first time. Taking into account this remark,

the authors interpret the obtained results as a tendency, not behavioral pattern of the customers.

Another limitation is the age range, as the decision was made to question respondents aged 20-35

years due to easier access to this category of respondents. At the same time this group is assumed

by authors as more active and the probability of their cooperation with companies is considered

to be higher.

The absence of the face-to-face contact with respondents can be an obstacle for gaining more

specific information. Moreover, respondents may have difficulties with interpretation of

questions, thus leading to results distortion. However, using electronic communication channels

such as phone, electronic mail and social network, respondents and surveyors can contact each

other, hence, decrease the possibility of the mentioned mishap.

The authors’ interpretation of the survey results might be subjective. As Bryman and Bell (2007)

states ―Qualitative findings rely too much on the researcher’s view about what is significant and

important.‖ Nevertheless, the authors tried to be objective and tended to provide reasonable

explanation of the obtained data.

27

6. Conclusion

In our thesis the aspects of customer driven innovation were investigated. This type of

innovations implies customers’ active involvement into cooperation with companies and their

ideas are considered as a driving force for innovations. Cooperation supposes active sharing of

customers’ ideas and suggestions; the role of the company in such case is to listen actively,

analyze, filter and implement obtained information. The results of the conducted survey show

that more than 50% of respondents from Post-USSR and European countries had an idea

concerning modification or creation of product/service. The task is to understand how company

can get these ideas.

One of the issues that were aimed to be discussed in the paper was a way of customers’

involvement into the collaboration with organizations. Companies can use such channels of

communication as helpline, personal web site, on-line forums, social networks etc. The result of

the study indicates that the most common tool for customers to share their thoughts and

suggestion with companies is corporations’ web site. Nowadays a number of Internet users is

approximately 2 milliards (on June 30, 2010 amounted to 1,966,514,816,

www.internetworldstats.com). Thereby, it appeared to be one of the easiest ways for companies

to reach their consumers via Global Network.

In the present study we provided examples of the global brands - Nokia, Starbucks, Hallmark

and Dell, that have experience in cooperation with customers and that created tools for

cooperation with them, such as Nokia Beta Labs, MyStarbucksIdea Project, Hallmark Idea

Exchange and Dell Idea Storm. The number of projects with customer involvement rises

significantly with each passing year which can be interpreted as increasing desire of the

companies to bring consumers to collaboration as well as of customers’ willingness to cooperate

with them.

The finding of the conducted survey shows that the main customers’ incentive for cooperation is

non-monetary. A sense of satisfaction, that provided idea is implemented, appeared to be the

most important motive for cooperation with companies among the respondents. Customers are

proud if their ideas are heard and put into practice. An additional reward for respondents in such

case is mentioning of their names in the product name or identification that they were co-

creators. Monetary reward is not the main one, although not the least important. Our

investigation shows that customers see their ideas as highly valuable source, hence may expect to

get tangible reward for it.

Potential obstacles that can limit or impede cooperation between customer and organization were

examined. Based on the theoretical material and survey results the conclusion was made that

there are various obstacles, limiting both – companies and consumers. Companies may encounter

the high cost of innovation that they cannot afford due to specific reasons, such as lack of

resources for innovation purposes, difficult financial situation of the company and a shortage of

information, technology and skilled personnel.

Companies can be afraid that cooperation with customers might be risky as the latter ones can

steal their business ideas and sell them to the competitors. Moreover, some companies may

consider that collaboration with consumers is not necessary and claim that ―we know our

business better than our customers do‖ (Gibbert, Leibord, Probst, 2002).

Customers as well can have a resistance towards innovations. As innovation is commonly

perceived as something new, modified or improved, people may associate it with changes in

their day-to-day life, habits etc. As a result, consumers can be afraid of difficulties that might

28

arise from using new products and of necessity to spend time in order to learn how to use them.

Hereby, the consequences of using such product (i.e. drugs, technical devices) or service can be

unpredictable for consumers and they try to postpone an adaptation of innovation.

Other factor that restrains customers from cooperation with companies is perception that

companies are not interested in their ideas and would not even listen to them. Despite the fact

that lots of companies claims about their readiness and willingness for cooperation, the survey

finding shows that some people still do not know whom they may contact in order to provide

their suggestions. Taking into account those two obstacles and existing number of possible

channels for communication, organizations should more actively inform customers about the

availability of sources for cooperation, express their readiness and willingness to listen to

consumers and respond.

In addition, people can expect monetary reward for their ideas or would more willingly offer

them to their relatives and acquaintances. In this case companies should provide high

motivations in order to get ideas.

Pål Burman (2010) claims that complaints can serve as one of sources of ideas for businesses.

The survey results show that lots of people would express their complaints only if it seems that a

company responds. It should be noted that, in contrast to ideas, complains are always free of

charge, although might appear to be not less valuable. This fact again emphasizes the need of

organization to listen attentively and respond to customers.

Before conduction of the survey the assumption was made that there should be diversity between

answers of representatives from Post-USSR and European countries according to socio-

economical and historical differences. The survey results do not show considerable differences

between responses. The similarity in answers can be explained by the phenomenon of

globalization which affects companies, as well as customers.

Based on the investigation of primary and secondary data the conclusion can be made that by

collaboration with customers, organizations have an opportunity to get a feedback in the form of

ideas, suggestions and complaints, which can be used for the further improvement or creation of

new products and services.

29

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32

Appendix 1

Dear respondent!

We are students of the International Management Program in Sweden. We are

conducting the research about cooperation between customers and companies. We would

highly appreciate your participation and kindly ask you to answer the following

questions.

Thank you in advance for your contribution.

Olga and Katsiaryna

Before answering the questions, please, write your personal details

Name ______________________________

Gender ______________________________

Age ______________________________

1. Do you think that nowadays companies tend to have a dialogue with customers, try to listen

to them? (chose on the 5-point scale the most suitable variant or put “don’t know”)

always 1 2 3 4 5 no, never don’t know

2. Have you ever had an idea concerning a modification or creation of a product/service?

- yes (describe the example)

____________________________________________________________________

____________________________________________________________________

- no

3. If you had an idea about the creation or modification of a particular product, by which

means would you attempt to express it (multiple answers are possible)?

- try to find a section for the comments and suggestions on the company webpage

- call custom service

- other ______________________

4. What do you think might be an obstacle limiting cooperation between a company and you as

a customer? (multiple answers are possible)

- customers do not feel comfortable to contact a company

- the probability that the idea would be accepted is very low

- customers do not know whom they may contact to propose their ideas

- other ________________

5. Have you ever expressed complaints and/or concerns to a company?

- no (go to question 7)

- yes (go to the next question)

33

6. How freely could you express your complaints to the company?

- I feel I could freely express my claims

- I feel uncomfortable expressing complaints

- I will do it, if it seems that a company responds

7. Through which channels would you express your complaints? (multiple answers are possible)

- company web page

- forums

- book of complaints

- helpline

- other ______________

8. Do you think companies should have an area for complaints and suggestions on their

webpage?

- yes

- no

9. Have you ever cooperated with a company in creation or modification of a product?

- yes

- no

10. If you took part in creation of a new product, which factor would be the most significant?

(multiple answers are possible)

- Monetary reward

- I am proud that I take part in a designing

- Satisfaction that my idea is implemented

- I am not interested in such kinds of activities

- Other ______________________________

11. Can you give an example from your own experience or from experience of your friends or

acquaintance, when a company took into account customers’ desires or suggestions?

You can contact me for the further discussion related to above listed question

(please, fill the square if you give your permission and leave your phone or\and email address)